Archive for May, 2012

Corporate America is Not a Pyramid Scheme

Many distributors promoting MLM try to defend legit pyramid scheme similarities with MLM by suggesting that other things out there are pyramid schemes. Quite often they'll use an analogy of a CEO managing Vice Presidents, managing middle managers, managing employees as a pyramid. You'll note that they often leave off the "scheme" part of that, which is a very important distinction.

There are so many differences that it is easy to expose the person making this claim as someone who is trying to defraud you. As the FBI says:

"At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment."

When you look at a software engineer, vice president, or CEO, does anyone make their salary recruiting other people to perform the same job as they do? You may argue that a HR person recruits, but they don't recruit a chain of HR people who recruit more HR people, etc. They recruit VPs and software engineers, and those people perform their duties, which don't typically include recruiting any others.

Here are a few other obvious differences:

  1. The typical CEO graduates from a very difficult business school and almost typically starts with a salary upwards of $150,000 a year in an executive position.
  2. The employee and/or manager isn't required to buy product to earn salary. This is what you see in MLMs and pyramid schemes: MLMs with Required Minimum Purchases to Earn Commissions are Pyramid Schemes

Corporate America is simply a hierarchical organization. It isn't a pyramid scheme with endless recruiting of 2 or more people making the same investment.

This post involves:

MLMs vs. Pyramid Schemes

... and focuses on:



MLM and Donald Trump

Many MLM distributors point out that Donald Trump is a supporter of MLM. The theory is that it will make MLMs seem more like legit businesses and less like a pyramid schemes. Like any blanket statement that MLM supporters make, it deserves a little investigation to see if there's a story that we are missing.

Donald Trump's biggest connection to MLM was The Trump Network... but the Trump Network is no more. Was it ever really in existence? Not really. According to that article, Ideal Health started in 1997 and leased the naming rights from the Trump brand in 2009. Donald was given a handsome sum so that the company could use the name in its marketing. Recently the company was sold to Antoine Nohwa and the Trump branding has been removed. According to the article, "Our informers think that the royalties paid for the name were a steep liability to the MLM company rather than the gold mine they all hoped."

So it turns out that Donald Trump never really owned an MLM as so many MLM distributors claimed. Not only that, but he simply did what any wise businessman would do cash in on his name.

MLM distributors may claim that Trump still supports MLM. There are videos out there of him saying that if he had to make his fortune all over again it would be in MLM. Well, the door is open for Trump to do MLM, he might as make two fortunes if it is such a great business opportunity, but we know that MLM is bad business.

Some may point to Donald Trump and Robert Kiyosaki's book, Why We Want You to Be Rich, is an endorsement of MLM. In fact it has a chapter on MLM. However, the reviews of the book were horrible. In addition, Kiyosaki was already exposed for telling lies about MLM as well as being biased because MLMs pitch his books.

"The Donald" has the opportunity to put his money where his mouth is and be an MLM distributor. Like every other famous MLM supporter they have chosen not to. Instead they take advantage of the distributors who are paid below minimum wage on average, receive no benefits, pay for their own training, and pay for the right to participate in the business. That's good for the owner of the MLM, but not good for the distributor.

This post involves:

MLM Fake Supporters

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Behind the Mind of an MLM Distributor

Whenever I explain The MLM Gas Station and $8/Gallon Gas or Tim Sales Scams to someone who is not affiliated with MLM, they either understand it right away or think it is ridiculous that I even have to write such articles.

Conversely when I show either of those to an MLM distributor, I get an illogical argument. Much of the time they'll ask who I am rather than concentrate on the issue directly. A similar thing happens if I point out that their company qualifies as an illegal pyramid schemes according to the FTC. I can give them the exact pages and quotes from the FTC's website and they disregard it completely. Sometimes they'll focus on enforcement of the law rather than the legality itself with an argument of: Then Why Hasn’t [My MLM] Been Shut Down by the Authorities?

For some time it perplexed me as to why an MLM distributor is unable to process very simple straight-forward logic that non-MLM distributors can. Then I read somewhere that it is something called congnitive dissonance. That's a psychology term that is new to me. Rather than explain what it is, it is best to give this example from Wikipedia:

"An example of this would be the conflict between wanting to smoke and knowing that smoking is unhealthy; a person may try to change their feelings about the odds that they will actually suffer the consequences, or they might add the consonant element that the smoking is worth short term benefits."

In short, a person will invent a new reality to suit their belief system. Wikipedia gives another example which explains the number of health-related MLM Scams:

"After someone has performed dissonant behavior, they may find external consonant elements. A snake oil salesman may find a justification for promoting falsehoods (e.g. large personal gain), but may otherwise need to change his views about the falsehoods themselves."

This explains why someone in an MLM that is an illegal pyramid scheme can discount the logical truth... they've changed their view about the falsehoods they tell until it is their reality.

On the other side of the coin, there is a percentage who knowingly participate in a pyramid scheme. My theory is, why take the risk? Avoid MLM, and the risks of losing your business overnight, altogether.

However, a Cage the Elephant song comes to mind: Ain't no Rest for the Wicked. It tells the story of three people knowingly performing illegal acts, because they got bills to pay and mouths to feed. Surely that plays a large role in some distributors minds as well.

This post involves:

MLM Mind Games

... and focuses on: